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Orissa HC Sets off Arbitral Award Allowing the Respondent’s Counter Claims

In the dispute between BIMTECH, Birla Institute of Management versus Fiberfill Interiors & Constructions, (ARBA. No. 26 of 2022), Orissa High Court passed an Order on July 28, 2022, by JUSTICE ARINDAM SINHA: “The order has held that a mere reply to the notice of arbitration would not save the period of limitation for filing the counter-claim(s). The Court held that the date on which the counterclaim is filed before the arbitrator would be the relevant date for determining the date of stopping of the period of limitation unless the respondent had issued a separate notice of arbitration raising the counter-claims,
Case Timeline:
  1. 27th March 2012: Work order dated raised between (BIMTECH) (the Appellant), Bhubaneswar, and Fiberfill Interiors & Constructions (the Respondent).
  2. 8th June 2012: Basis the aforesaid, an agreement dated was entered into, which by clause-6 therein made time essence of the contract, stating the design work was to be completed by 15th November 2012.
  3. 12th July 2014: Work was terminated (as the Respondent did not complete the work).
  4. 30th July 2014: The Respondent vacated the site.
  5. 17th September 2016: an email sent by the Appellant to the Respondent whereby both parties agree to appoint an arbitrator for determining the amount due to the respondent.
  6. 25th March 2017: the Appellant issues the notice invoking arbitration
  7. 07th April 2017: the Respondent denies its liability to pay and states that an amount of Rs. 6 Cr is due to it from the petitioner. The Respondent agrees that the parties have an arbitration agreement, therefore, an arbitrator was appointed.
  8. 18th September 2018: Statement of defence filed by the respondent along with its counter-claims.
  9. 16th April 2022: The arbitrator awards a sum of Rs. 5,21,60,618/- to the respondent by allowing the counter-claims.
  10. 4th July 2022: The Appellant appeals the award.
  11. 28th July 2022: Order passed by Orissa High Court that a mere reply to the notice of arbitration would not save the period of limitation for filing the counter-claim(s).
Reasons for Appeal

The Appellant’s legal representative stated that the dispute was dated in the year 2014 when the contract was terminated and the respondent vacated the site; however, the counter- claims were only raised by the respondent on September 18, 2019, which should have resulted in the counter-claims being barred by limitation on the date of institution. Secondly, the time-barred counter-claims of the respondent were allowed by the arbitral tribunal, which was an err on their end hence the award on the counter claim suffers from grounds in section 34, for it to have been set aside. The Court below had not done so.

Reason for Sustaining the Arbitral Award

The Respondent in supporting the award on the counter claim raised two contentions in the alternative. The first is in supporting reasoning given in the award and impugned judgement on the finding of fact regarding limitation. The found fact relied upon is that the final bill had not been settled and therefore, it cannot be said that the prescribed period had commenced running against the respondent in preferring a counter claim. The alternative contention is based on the State of Goa (supra) on basis of the said letter dated 7th April 2017 for the respondent to claim as covered by the exception curved out in the judgement.

  • The Respondent's claim that it stands covered by the exception carved out in State of Goa (supra) was rejected by the Orissa High court stating that the Supreme Court SC had merely held that if the respondent has any counter-claim against the petitioner and it had by a separate notice of arbitration intimated the petitioner of its claims, then the date of such a notice would be relevant for the purpose of determining limitation.
  • The Orissa HC stated that the respondent did not fulfil the twin conditions laid down in Praveen Enterprises (supra) as it neither intimated the petitioner of the particulars of its claims nor did it issue any notice of arbitration that would have stopped the period of limitation.
  • Judge SInha ruled that respondent’s letter dated April 07, 2017, was a mere reply to the arbitration notice issued by the Appellant on March 25, 2017, therefore, it cannot save the limitation period.
  • The Court further held that the date of settlement of final bill is inconsequential when the agreement was terminated and the respondent vacated the work site in 2014 only.
  • The Ruling held that email dated September 17, 2016, cannot amount to acknowledgement of debt as the petitioner had merely agreed to the appointment of arbitrator without admitting any liability to pay.
  • The Court held that the counter claims preferred by the respondent on August 18, 2018, were barred by limitation.

The arbitral award was set aside by the Orissa HC to the extent it allowed the Respondent’s counter claims, and the appeal was disposed of.